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New provisions to strengthen AML/CFT framework of financial institutions in Singapore

On June 26, 2015, legislative changes to the Monetary Authority of Singapore Act (MAS Act) came into force to enhance the effectiveness of the anti-money laundering and countering the financing of terrorism (AML/CFT) regime of Singapore’s financial industry. The Monetary Authority of Singapore (MAS) is Singapore’s central bank and oversees all financial institutions in Singapore. The new provisions will strengthen MAS’ supervisory powers over financial institutions and enhance its ability to cooperate with foreign regulatory authorities. With these changes, Singapore’s regime will align with international standards set by the Financial Action Task Force (FATF) and the Basel Committee on Banking Supervision.

There are three key aspects to the amended MAS Act:

1. Set out AML/CFT requirements in the MAS Act

While financial institutions (FIs) in Singapore have always been subject to the stringent obligation to conduct customer due diligence (CDD) and maintain records, these requirements are imposed via MAS-issued AML/CFT Notices, which are not primary legislation.

To align with FATF’s recommendation and international best practices, the MAS Act now expressly sets out the requirements to conduct CDD and maintain records on transactions and information obtained through the CDD process. Details of such requirements will however continue to be reflected in the AML/CFT Notices.

2. Enhanced supervisory powers granted to the MAS

MAS’ powers of inspection, which were previously in various sector-specific legislation, are now consolidated and clarified in the MAS Act. The new provisions will vest MAS, or a MAS-appointed third party such as an auditor, with the power to inspect FIs for compliance with Singapore’s international obligations such as the United Nations Security Council Resolution on sanctions, and AML/CFT directions or regulations. MAS will also have the power to authorize its foreign counterparts to conduct on-site inspections, limited to only AML/CFT supervisory purposes, of the FIs’ branches or subsidiaries in Singapore.

In addition, the MAS Act has now been amended to extend MAS’ supervisory powers in respect of AML/CFT to non-bank credit card or charge-card issuers.

MAS will have the power to share information with its foreign counterpart on FIs under their home jurisdiction on AML/CFT issues. MAS may also make AML/CFT supervisory enquiries on behalf of its foreign counterpart. Nevertheless, strong safeguards are in place to prevent abuse and “fishing expeditions.” In granting any request for information, MAS will only provide assistance for bona fide requests. Any information shared will be proportionate to the specified purpose, and the foreign AML/CFT authority has to undertake not to use the information for any purpose other than the specified purpose, and to maintain confidentiality of any information obtained.

Domestically, MAS has been vested with the power to share information with the relevant Singapore authorities to take necessary action, including conducting investigations or sanctioning of any offense.

Comments

As Singapore already has a stringent AML/CFT regime in place, we do not see the amendments as having a major operational impact. Nevertheless, the new amendments to the MAS Act are timely and are much welcomed in clarifying and enhancing MAS’ supervisory powers.

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